Slouching Towards Utopia?: The Economic History of the Twentieth
Century

-XXII. The High Tide of Social Democracy-

J. Bradford DeLongUniversity of California at Berkeley and NBER

February 1997

The Social Insurance State

Equality of Opportunity--and Perhaps Result

Blue Collar, White Collar, Pink Collar

Civil Rights

The Regulatory State

Further to the Left?

The Social Insurance State

The popularity of social insurance

The amount of redistribution

Incentive effects of redistribution

Measuring the amount of social insurance

The growth of Keynesian doctrines of macroeconomic management
as a result of the Great Depression carried with it an expansion of government
social insurance spending: if the government was to be spending a fortune
to stimulate the economy and avoid depression, then it should at least
spend its fortune in a way that enhanced the general welfare. Few sought,
after World War II, to see the government return to its pre-Depression
role. Centrists feared that abandonment of social insurance would lead
to abandonment of the Keynesian stabilization mission, and a return of
the Great Depression. Left-wingers and unions saw in an expanded role of
the government a way to eliminate, or at least to reduce, the evils of
laissez-faire. Right-wingers and industrialists hoped that the "cooperative"
social and production climate could be continued, and saw the social insurance
state as offering the possibility of doing so at a low price in terms of
taxes levied to finance the programs.

On June 4, 1965, President Lyndon Johnson was scheduled
to deliver a speech at Howard University....[The speech was] going to make
the President who had completed the civil rights legislation call that
achievement inadequate.... The right to eat at an integrated lunch counter,
buy a home in an integrated neighborhood, go to an integrated school, join
an integrated work force--all these things had been vindicated without
giving men the money to buy hamburgers or a home....

The civil rights laws had been based on a concept of equal
opportunity.... President Johnson... was going to move blacks straight
from stage one (equal rights) past stage two (equal opportunity) to stage
three (equal results): "You do not take a person who, for years, has
been hobbled by chains and liberate him, bring him to the starting line
of a race and then say, 'You are free to compete with all the others,'
and still justly believe that you have been completely fair.'

'Not just equality as a right and a theory, but equality
as a fact and a result.'

from Garry Wills, Nixon Agonistes.

Blue Collar, White Collar, Pink Collar

In the 1950s trade unions seemed permanently established
in the economies. of the industrial core.

Unions

Feminism and women's rights

Women enter the paid labor force

Discrimination

Civil Rights

In 1940 the average African-American worker in the United
States had three years fewer of education than the average white worker.
A substantial majority of white Americans approved of discrimination--in
employment, in housing, in education, and in voting. African-American men
were concentrated in unskilled agricultural labor, primarily in the low-productivity
and low-income (even for whites) south of the United States; African-American
women were concentrated in unskilled agriculture and in domestic service.
Both were extremely low-paid occupations: African- American men and women
earned an average weekly wage some forty-five percent of their white counterparts.
African-American male college graduates earned some $280 a week (in today's
dollars); white high school graduates earned some $560 a week. In 1940
some 48 percent of white families fell below today's "poverty line"
according to official statistics; some 81 percent of African-American families
were in poverty.

All indications were that this combination of offical
discrimination against African-Americans would continue to enforce relatively
low rates of education, relatively low wealth, and rampant poverty into
the indefinite future. As Gunnar Myrdal entitled his book, the inconsistency
between an "American creed" of equality of opportunity and the
actual position of African Americans was An American Dilemma. But
there seemed to be no reason why the country could not live with this dilemma.
The contradiction had been there in 1775. Yet it had managed to coexist
with the institution of slavery for ninety years--and would have coexisted
with slavery much longer had nto the issue of opposition to slavery become
attached to the issue of preserving national union. President Abraham Lincoln
could abolish slavery in the Civil War because it was seen as a means of
preserving the nation in a strongly nationalist context. Myrdal's "American
creed" managed to coexist with official state-sanctioned discrimination
and disenfranchisement for another full century. There are still some who
think that the Democratic Party's rejection at its 1964 convention of a
Mississippi delegation with no African-American representation was an unconscionable
mistake. Discrimination is still a reality in America today.

Yet by the end of the century things were very different.
Virtually all whites would publicly espouse the principle of equal
employment opportunity for African-Americans. Educational attainment by
race was almost identical for those finishing school in the late 1980s
and 1990s. African-American men's average weekly wages were two-thirds
those of whites; African-American women's average weekly wages were more
than ninety-five percent those of whites on average.

It is impossible not to credit the change to the extremely
wise leadership and the extremely skillful use of moral force by the leadership
of the African-American community. Martin Luther King Jr., Ralph Abernathy,
Thurgood Marshall, earlier leaders like Booker T. Washington and W.E.B.
Du Bois, and many others played an extremely weak hand with immense skill
and patience, and with extraordinary long-run success. They are among the
greatest of the heroes of the twentieth century.

The major sources of gains from 1940 to 1970 involved
three factors: the end of formal, legal, state-sanctioned discrimination;
the migration of African-Americans from the rural south to the urban north;
and the associated shift from low-paid low-skill agricultural employment
to industrial and service industries. The period was accompanied by large
increases in African-American's educational levels, and high rates of employment
growth and productivity growth in the rest of the economy.

Title VII of the 1964 Civil Right Act made employment
discrimination illegal. There is every reason to think that civil right
enforcement made a significant difference in speeding the economic advance
of African Americans. Employment discrimination lawsuits acted as a spur
to boost hiring. Government contractors expanded their African-American
workforces much faster than did non-contractors.

The period from 1940 to 1970 was one of substantial relative
advance. The picture from 1970 to 2000 was more mixed. By the end of the
1980s at least one in five of African-American prime-aged men (aged 25-54)
reported no earnings in a given calendar year. Real per capita family
income for African-Americans at the end of the twentieth century was some
sixty percent of whites: almost exactly what it had been at the end of
the 1960s.

The less favorable relative income performance of 1970
to 2000 had two causes. The first was a general, economy-wide cause: the
growth in income inequality as changes in technology and production appeared
to greatly diminish employers' relative demand for less-skilled and educated
workers, and to greatly increase employers' relative demand for more-skilled
and more-educated workers. The second were changes in family structure:
the rise in divorce, the rise in births outside of marriage, and the consequent
rise in single-parent almost inevitably female-headed households. The poverty
rate for two-parent African-American families with children today is 12.5%.
The poverty rate for single-parent African-American families with children
today is 56.3%. More than half of African-American children in the last
decades of the twentieth century spent more than half their childhood below
the poverty line.

The traditional explanation for the decline in African-American
two-parent families--the explanation provided by ideologists like Charles
Murray and George Gilder--was that more generous welfare payments had triggered
the collapse of the African-American family. But it was hard to escape
the conclusion that those advancing this traditional explanation simply
had not done their arithmetic. Welfare and food stamp payments for a mother
with three children rose by one-third between 1960 and 1970, but then declined.
By the mid-1990s welfare payments were lower in inflation-adjusted terms
than they had been in 1960; real wages were some one-third higher--some
fifty percent higher for African-American males. Maintaining a two-parent
household was, in material terms, a much more advantageous option relative
to split-up and welfare receipt in the 1990s than it had been in the 1950s
and 1960s.

A better explanation was that African-American families
were caught in the backwash of broader society-wide changes--but were especially
vulnerable to them. The 1980s saw the election of America's first divorced
president, Ronald Reagan. By the 1990s the children of one Speaker of the
House of Representatives--the Republican Newt Gingrich--had grown up in
a single-parent family. And trends in the 1990s suggested that a majority
of white children in America would spend at least some time in a single-parent
household.

Further to the "left", as the political spectrum
was defined in the mid-twentieth century, were those coming out of a Marixist
tradition who felt that Social Democracy was insufficient. What were the
prospects of a shift from social democracy to something futher to the left?

The prospects were always small, in large part because
of the intellectual reaction of the First World left to the economic
history of the twentieth century.

The most powerful intellectul criticism of Marxism was
the "it ain't so" line of criticism: that the claims of Marxism-as-social-science
were simply ludicrously wrong.This criticism is powerful
because true. And it is one that the far left has avoided answering. Instead,
they have steadily retreated from the analysis of economic reality. This
retreat has been a great irony: a thinker who spent his life trying to
focus the attention of the left on the extraordinary economic revolution
gathering speed has had his doctrines twisted into a knot that has crippled
left-wing economic analysis for a century.

Since the lingua franca of the left has been this
dialect of retreating and increasingly abstracted Marxism, those positioning
themselves to the left of social democracy have remained committed to the
principle that the essence of the market system is evil--as Marx intuited--and
that the relevant task is to figure out just how. The puzzle is how
to reconcile the evil essence of market capitalism with its relatively
benign appearance in advanced industrial economies-rapidly growing wealth,
steadily advancing real wage levels, no radical growth in the degree of
inequality, and so on. This has kept the far left's attention away from
real issues of reform and progress. It has had little constructive to say
to the mixed economies and democratic governments of the industrial west
in the late twentieth century.

The first stage on the retreat was to argue that
the market had temporarily avoided immiserizing its own working classes
by imperialism. This was always implausible from a quantitative standpoint:
however large in proportion to peripheral economies were the spoils squeezed
by imperial cruelty, the spoils were always small relative to production
and investment in the core industrial west. From the seventeenth century
on the west was too rich, and the non-west was too poor, for exploitation
of the peripheries of empire to significantly affect the economic
dynamic. This stage of the retreat added to the left's burdens a suspicion
of international trade and investment as a form of "unequal exchange."

The second stage on the retreat was to argue that even
though capitalism made workers productive, it "alienated" them
from their true selves. In their advertising-induced thirst to consume,
they sold their creativity and life-activity to become less than human
cogs on the assembly line. But this ducked the question: people become
cogs only if they have insufficient wealth and insufficient skills
to live well while working at jobs that reward and nurture their creative
impulses.

"Alienation" is a consequence of a skewed distribution
of income. When society becomes richer and other opportunities become more
attractive, people stop being willing to perform "alienating"
jobs: the collapse of employment in domestic service in the industrial
west in the twentieth century-the same collapse that helped convince Orwell
that the system was impoverishing the upper middle class-is an example
of how a richer and more equal society allows those close to the bottom
of the income distribution to become more choosy both about the types of
jobs they will take and about the terms under which they will take them.

But the major harm done by the retreat has been the stamping
into the left of a fear of markets, and thus by default a love of hierarchies
and bureaucracies. Marx showed that markets are bad, goes the current of
thought, and lead to inhuman social outcomes. So whatever arrangement is
chosen, it must be better if we avoid choosing the market.

But in practice the alternative has always been control
by the government, or by some fraction of its administrative bureaucracy.
And the government has limited administrative competence, limited degrees
of accountability to those in whose name it is acting, and objectives other
than that of providing for the general welfare. The tasks of designing
institutions so that they advance the general welfare rather than the narrow
power and wealth interests of those who hold positions that turn out to
be key ones are very difficult.

One need not have a specific idea of a
reasonably constructed automobile, a well planned neighborhood, a beautiful
musical composition, to recognize that the model changes that are incessantly
imposed upon us, the slums that surround us, and the rock-and-roll that
blares at us exemplify a pattern of utilization of human and material resources
which is inimical to human welfare.

from "A Supermarket in California"

by Allen Ginsburg

What thoughts I have of you tonight, Walt Whitman...

In my hungry fatigue, and shopping for image, I went into the
neon fruit supermarket, dreaming of your enumerations!

What peaches and what penumbras! Whole families shopping
at night! Aisles full of husbands! Wives in the avocados, babies
in the tomatoes!--and you, Garcia Lorca, what were you doing
down by the watermelons?...

We strode down the open corridors together in our solitary
fancy tasting artichokes, possessing every frozen delicacy, and
never passing the cashier.

Where are we going, Walt Whitman? The doors close in an hour.
Which way does your beard point tonight?...

Ah, dear father, greybeard, lonely old courage-teacher, what
America did you have in mind when Charon quit poling his
ferry and you got out on a smoking bank and stood watching
the boat disappear on the black water of Lethe?